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Trigran Investments’ Holdings: Douglas Granat and Larry Oberman’s Top Moves

Trigran Investments is an Illionois-based hedge fund that was founded in 1992 by Douglas T. Granat. Granat currently serves as the fund’s Director/President alongside Larry Oberman, who joined the fund in 1993 and is currently its Director/Executive Vice President. The fund has regulatory assets under management of around $565.90 million. Trigran uses a fundamental approach in analyzing its potential investments and holds a relatively small number of holdings. The fund generally prefers to invest in companies that have a market capitalization of under $2 billion, and which it believes are trading at a discount to their intrinsic value. Trigran’s benchmark is the Russell 2000 Index, which it seeks to beat over the long run.

Trigran is one of over 650 funds that we track at Insider Monkey. We analyze these funds’ quarterly 13F filings in order to identify their collective sentiment towards thousands of publicly-traded companies. The data we compile is used to identify stocks that are best-suited to be included in our investment strategy. Our picks are shared with the premium subscribers of our quarterly and monthly newsletters (see more details here). Since February 2016, our strategy has generated returns of more than 45%.

Trigran has recently filed its 13F for the June 30 reporting period, in which it disclosed its equity positions as of the end of the second quarter. According to the filing, the fund has an equity portfolio worth $390 million as of the end of June, up from $364 million a quarter earlier. A closer look at the positions included in the portfolio reveals that Trigran is focused on technology stocks, which have consistently amassed the largest chunk of the fund’s portfolio for the last several years. At the end of June, more than 40% of the value of Trigran’s 13F portfolio was invested in the technology sector, followed by energy and healthcare stocks, which represented 16% and 9% respectively.

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The increase in the value of Trigran’s equity portfolio can be attributed to the fact that the fund raised its exposure to most of its holdings between April and June. In fact, out of 18 positions, Douglas Granat’s fund increased its stakes in 15. At the same time it reduced its stakes in two companies, closed two positions and did not add any new investments to its portfolio.

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With this in mind, let’s take a closer look at seven companies in which Trigran made the largest moves during the second quarter. Six of the companies from the list saw Douglas Granat and Larry Oberman boost their fund’s holding by more than 25%, while in one company, Trigran substantially cut its stake. The holdings are sorted based on their size in the fund’s 13F portfolio and aside from Trigran, we will take a look at other investors’ sentiment towards the companies in question.

1. Integrated Device Technology Inc (NASDAQ:IDTI)

Integrated Device Technology Inc (NASDAQ:IDTI) represented Trigran Investment’s second-largest holding at the end of June, with the fund having disclosed a $39.0 million position that contained 1.51 million shares. During the second quarter, the fund boosted the size of its holding in the company by 38%. On the other hand, Paul Marshall and Ian Wace’s Marshall Wace LLC cut its stake by 83% to 98,900 shares during the second quarter.

Integrated Device Technology Inc (NASDAQ:IDTI)’s stock has advanced by 24% over the last year amid the company consistently beating EPS and revenue estimates. For the first quarter of its fiscal year 2018 (ended July 2), Integrated Device Technology posted EPS of $0.33, beating the consensus estimate of $0.32, while its revenue of $196.70 million was $1.60 million higher than expected. Given Integrated Device Technology Inc (NASDAQ:IDTI)’s wide portfolio of products that serve the telecom and automotive industries, among others, many analysts believe that the company is poised to maintain its growth.

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2. KMG Chemicals, Inc. (NYSE:KMG)

On the other hand, in KMG Chemicals, Inc. (NYSE:KMG), Trigran cut its stake by 43% to 766,999 shares. Nevertheless, the position, valued at $37.33 million, was the fund’s third-largest heading into the third quarter. KMG Chemicals, Inc. (NYSE:KMG) is a $600 million producer of specialty chemicals, whose stock has soared by 23% since the beginning of 2017. The company has been flying under the radar due to its small size, but this could change soon, given KMG Chemicals, Inc. (NYSE:KMG)’s acquisition spree. Since 2008, the company has completed seven acquisitions, including two this year alone. In addition, KMG Chemicals, Inc. (NYSE:KMG)’s financials have been improving, with the company having posted solid revenue growth in the last two quarters, as it managed to beat both top and bottom-line estimates. Aside from Trigran, other investors of KMG Chemicals, Inc. (NYSE:KMG) include Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Chuck Royce’s Royce & Associates.

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3. Monotype Imaging Holdings Inc. (NASDAQ:TYPE)

In Monotype Imaging Holdings Inc. (NASDAQ:TYPE), Trigran Investments acquired 459,025 shares between April and June, having ended the quarter with 1.85 million shares worth $33.83 million. Royce & Associates also disclosed ownership of 688,700 shares of Monotype Holdings in its latest 13F filing. Monotype Imaging Holdings Inc. (NASDAQ:TYPE) is a small-cap developer of fonts, which pays a decent dividend of $0.11 per share. With its share price sliding by 13% over the last year, Monotype’s stock is currently sporting a forward yield of 2.39%.

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4. CECO Environmental Corp. (NASDAQ:CECE)

In CECO Environmental Corp. (NASDAQ:CECE), Douglas Granat’s fund raised its stake by 26% to 2.08 million shares valued at $19.13 million. Recently, CECO Environmental Corp. (NASDAQ:CECE) posted its financial results for the second quarter, missing both revenue and EPS mean estimates. The company’s EPS of $0.08 was well below the expected $0.19, while revenue of $93.90 million declined by 16% on the year and was slightly lower than the consensus estimate of $99.10 million. Other shareholders of CECO Environmental Corp. (NASDAQ:CECE), a provider of engineered technology to the energy, environmental, and fluid handling and filtration industrial segments, include Royce & Associates, Algert Coldiron Investors, and J. Alan Reid, Jr.’s Forward Management.

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5. Silver Spring Networks Inc (NYSE:SSNI)

Trigran Investments also boosted its position in Silver Spring Networks Inc (NYSE:SSNI) during the second quarter, by 188% to end the period with ownership of 1.46 million shares worth $16.42 million. The stock of the $700 million developer of large-scale networks and solutions for critical infrastructure has inched down by around 2% year-to-date, mainly affected by the company missing the consensus estimates in its first-quarter financial report. The decline however was offset by a strong second-quarter report, which included EPS of $0.34 and revenue of $78.74 million, which easily beat the expectations of a loss of $0.07 per share and revenue of $69.40 million, respectively. At the end of June, Charles Frumberg’s Emancipation Capital held 82,100 shares of Silver Spring Networks Inc (NYSE:SSNI), up by 62% on the quarter.

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6. The Hackett Group, Inc. (NASDAQ:HCKT)

During the second quarter, Trigran’s position in The Hackett Group, Inc. (NASDAQ:HCKT) surged by 531,681 shares to 641,337 shares valued at $9.94 million. Another investor bullish on The Hackett Group, Inc. (NASDAQ:HCKT) is Marshall Wace LLC, which initiated a stake containing 236,300 shares during the second quarter.

After having registered a jump in February following better-than-expected financial results, The Hacket Group, Inc. (NASDAQ:HCKT)’s stock plunged in May on the back of the company missing top-line estimates and is currently 25% in the red year-to-date. The company’s second-quarter report posted earlier this month was also disappointing to investors, as revenue of $73.60 million was $800,000 lower than expected, although EPS of $0.25 was in-line with expectations. For the current quarter, the IP-based strategic consultancy expects net revenue of between $64.4 million and $66.2 million, while EPS is forecasted in the range of $0.24 to $0.26.

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7. Dolby Laboratories, Inc. (NYSE:DLB)

In Dolby Laboratories, Inc. (NYSE:DLB), Douglas Granat’s fund increased its holding six-fold, having amassed a $5.50 million position that contained 112,374 shares. Dolby Laboratories, Inc. (NYSE:DLB)’s stock has grown by 11% since the beginning of 2017 and currently has a yield of 1.12% based on the $0.14 dividend that the company is paying this year.

In the last couple of years, Dolby Laboratories, Inc. (NYSE:DLB) has seen its revenue grow and the company has been consistently hiking its dividends. As home television technology is advancing, Dolby Laboratories, Inc. (NYSE:DLB) is set to continue the expansion of its technology, which is among the leaders in the audio and imaging segments. Earlier this year, the company started offering its Dolby Atmos technology to Netflix, Inc. (NASDAQ:NFLX), one of the largest providers of on-demand video content. Other shareholders of Dolby Laboratories, Inc. (NYSE:DLB) include billionaire Jim Simons’ Renaissance Technologies, Michael Price’s MFP Investors, and Cliff Asness’ AQR Capital Management.

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Disclosure: None